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Leasing a Car: 7 Reasons Why You Should Consider It

7 Reasons Leasing a Car May Be Smarter for You

Would you like to spend less money up-front, drive away from the dealership in a brand-new car, and spend less time and money on vehicle maintenance?

Consider leasing your next car.

What Does Leasing a Car Mean?

Leasing a car is a lot like renting one—but for a much longer period of time. When you buy a car, you own it after you’ve made all your monthly payments. When you lease a car, you make monthly payments, drive it for a set amount of time (usually about three years), and then give it back to the dealer when that time is up.

Then you get to decide what you want to do next with no strings attached—do you want to lease again or buy a car this time?

While leasing isn’t the perfect solution for everyone, it is absolutely worth considering. Here are seven reasons leasing a car might be the better option for you.

1. You Get to Drive Newer Cars

If you’re the kind of person who likes driving a new car, leasing your vehicle may be a better option than buying one. Cars depreciate quickly, so if you buy a new car, you’ll probably owe more than it’s worth not long after you make the initial purchase.

If you lease instead of buy, you can keep driving new cars indefinitely—just trade in your old lease for a new one every few years. That means you’ll have access to the latest features, like better navigation, back-up cameras, or music players. You could even lease an expensive car for an affordable monthly payment.

2. You Probably Pay Less Up-Front

Traditional car loans usually come with somewhat hefty down payments. But if you lease instead, you’ll likely have a lower down payment than you would with a normal loan. In fact, some dealers may not require a down payment at all.

This means you pay much less up-front so you can put that extra money toward home repairs, a vacation, or paying down existing debt.

3. You Get to Drive a Safer, More Reliable Car

When you lease, you’ll probably drive a newer car, which can be safer and more reliable. The newest cars have the most recent safety features and are compliant with current safety regulations that older cars might not meet.

Plus, since a newer car has less wear and tear, it’s less likely to break down and leave you stranded in an unsafe situation on the side of a fast highway or miles away from civilization.

4. You’ll Likely Spend Less on Repairs and Maintenance

Usually, a newer car needs fewer repairs, but when issues do come up, repairs will often cost less if you lease your vehicle. Most of the time, the vehicle you’re leasing will still be covered by the manufacturer’s warranty, so you won’t have to foot the bill for expensive repairs. There’s a good chance that basic maintenance, like oil changes, will also be covered in your lease agreement or car warranty. 

5. Your Monthly Payments Might Be Lower

When you lease a vehicle, you pay for the vehicle’s depreciation during the lease. When you buy, you’re paying taxes, fees, special finance charges, and the full price of the vehicle.

This means that monthly lease payments are usually lower than loan payments.

6. You Don’t Have to Worry about Selling Your Car

Selling a used car can be a hassle. With leasing, you skip it entirely. Instead, you drop the car off with the dealer when the lease is up. Then you’re free to lease a car again or purchase a new one without worrying about trade-in value or an ownership transfer.

7. You May Pay Less Sales Tax

If you buy a car, you pay taxes all at once for the full value of the vehicle. When you lease, you pay taxes on your monthly payment and spread that cost out over time, so there’s a good chance you’ll pay less sales tax.

Things to Remember about Leasing a Car

There are lots of great perks about leasing instead of buying, but it isn’t the perfect solution for every person. If you decide to lease a car, there are a few things you should remember.

  1. You Still Need to Get through a Credit Check

Leasing isn’t the same as a normal car loan, but it is still a form of financing, so a dealer will check your credit to make sure you’re eligible for a lease. In fact, you might need a higher credit score to lease than you would need to buy.

If you have a low credit score, you may pay a higher interest rate or be denied financing altogether. It is always wise to keep an eye on your credit report throughout the year to look for errors or other problems. For the best rates, make sure your credit is in good shape before you apply for financing.

  1. You May Have to Stick to a Mileage Limit

Leases come with mileage limitations. In most cases, that limitation will be somewhere between 10,000 and 12,000 miles per year. If you go over that limit, you pay extra fees for every extra mile—which can be costly.

Before you sign up for a lease, think carefully about how much you drive each year. Your daily commute is probably the biggest thing to consider, but all those little trips to the grocery store can also add up. If you drive more than 10,000 miles in a year, you may want to pay for extra miles or buy a car instead.

  1. You Get Charged for Extra Wear and Tear

Leases require you to keep the vehicle in good condition. If you turn it in with stains, scratches, dents, or dings, you’ll have to pay extra charges. Should you lease a car, take extra good care of it.

  1. You Could Be Penalized for Terminating the Lease Early

Car leases work a lot like other lease agreements. If you terminate your lease early, you may be subject to significant penalties and fees—just like you would be if you broke an apartment lease early.

  1. You Can’t Modify the Vehicle

Lease agreements have strict rules, and if you violate the agreement, you’ll be fined. Modifications will likely violate the warranty or lease terms—even if they’re modifications that you consider upgrades, such as shiny new rims or a more powerful sound system.

Should You Lease or Buy a Car?

Leasing is an excellent option if you’re comfortable with the limitations that are spelled out in the lease agreement. If you’re still on the fence, ask yourself the following questions to determine whether a lease is best for you:

  • How much do you drive each year? If you love going on epic road trips, leasing may not be the best option, but if you just need a car to get to and from work and around town, a lease would work well.
  • How much do you want to spend up-front? If you don’t have a large down payment saved up, you could get into a new car faster by leasing instead of buying.
  • Is driving a new car important to you? If you’re okay driving the same car for the next 10 to 15 years, you should probably just buy one. However, if you want to consistently drive newer vehicles, leasing is one of the easiest ways to do that.
  • Does vehicle maintenance frustrate you? Because leased cars are newer, they usually have fewer maintenance issues. And when those issues do come up, they’re often covered under the manufacturer’s warranty. If you don’t want to think too often about maintenance, leasing might be a good call.
  • Do you have good credit? Sometimes, you need better credit to lease a car than to buy one. If you’re still working on repairing your credit, you may have to purchase a car instead of leasing one.
  • Do you care more about short-term or long-term savings? Leasing is a great way to save on up-front costs. It also usually results in smaller monthly payments, which makes leasing a perfect option if you want to save money right now. However, in the long run, leasing may cost more than buying since you don’t own any property at the end of your lease.

When deciding whether leasing or buying a car is better for you, carefully consider all the various factors. It’s important to take your own needs and preferences into account to determine which is the most reasonable solution. Use the tips above and research local leasing options to ensure you pick the best one.
Image: iStock

The post Leasing a Car: 7 Reasons Why You Should Consider It appeared first on Credit.com.

Source: credit.com

What Is the Average Used Car Loan Rate?

average-used-car-loan-rate

Article originally published July 13th, 2016. Updated October 30th, 2018.

More people are opting to lease their new set of wheels instead of purchasing them, according to Q2 2018 data from Experian.

The number of auto loans grew to an all-time high, with leasing surpassed 30% of all new consumer vehicle sales. But the interest rates consumers are getting on these loans has stayed low, especially for used cars. In fact, Experian reported that average loan rates saw some increases, but still remain historically low.

Loan rates for a new car in Q2 of 2018 were 5.76%, up from 5.20% a year prior. Franchise used rates are 8.28% (down from 7.88% in Q2 2017), while independently used rates are 11.87% (down only 0.17% from Q2 2018).

The Experian Automotive scoring deems prime consumers as those with scores of 661 to 850, nonprime users with scores of 601 to 660, and subprime users as those with scores of 300 to 600. Consumers on all risk tiers are increasingly choosing to lease over purchasing cars, according to the report.

The number of prime consumers choosing used vehicles increased from 55.61% in Q2 2016 to 55.79% in Q2 2018. The number of nonprime and subprime consumers also saw increases, from 21.75% to 22.05% and decreases of 25.71% to 25.05%, respectively.

Experian reported that the increased number of prime consumers choosing used vehicles resulted in “score increases, greater percentages of used financing in the prime risk tier and lower average used rates.”

Getting a Car Loan

If you’re thinking about buying a used car and taking out an auto loan to do it, it’s a good idea to review your credit first. Having a good credit score can help you qualify for better terms and conditions on your financing. (To find out where your credit stands, you can see two of your credit scores for free, updated every 14 days, on Credit.com.)

And when you’re figuring out how much you can afford, remember to consider not only how much your monthly car payment will be but also how much the loan will cost you in the end, by considering the interest rate and length of the loan term. (The longer the loan term, the more interest you will pay.)

If you aren’t happy with what you see, don’t worry — you may be able to improve your credit scores by paying down any big credit card balances, disputing errors and limiting credit inquiries until your score has had time to rebound.

Gather All Documentation

When attempting to get a used car loan, you will want to gather all the necessary documentation including the following:

  • Your Driver’s License
  • Proof of all of your income- this can be a paycheck stub or even a tax return
  • A utility or phone bill to prove your residency
  • Your social security number so they can run your credit check

These days, you can often apply for the used car loan right online or even by phone which makes it the process that much easier and accessible.

Start With Your Own Banking Institution

It is always a good idea to start with your own bank or credit union for financing because you have already established history and relationship with them. Typically, you will be able to find the absolute best rates and more favorable terms if you go through your own bank.

They will also be able to advise you on all the options that are available to you as you begin the journey toward car ownership.

Shop for the Best Rates

You never want to settle on the first rate you are given; don’t be afraid to shop around to see if you can find something better than the typical auto loan rates. You will find the best auto loan rates if you have good credit. Additionally, if you apply for multiple loans within a 14 day period, it will only count as one hard inquiry so that you can find the best rate possible.

What is the Average Used Car Loan Rate?

Typically, you will find that the car loan rate on a used car is going to be a bit higher than the rates you would find with a newer car. For example, good credit car loans can see an interest rate as low as 3.9% for a newer model and a little more than 5% for its older version.

Average Auto Loan Rates by Credit Score

The following are the average rates you may find for a used car loan that carries a 60-month repayment term based on a range of different FICO Scores.

With a credit score between 500 and 589, you may be looking at interest rates on the loan as high as 16%. A bad credit score also makes it a lot harder to get approved for the car loan initially as well.

A credit score in between 590 and 619 will typically see the 15% mark, and the percentages get lower from here with the lowest coming in at 4.39% with a credit score between a 720 and 850.

A longer loan term will usually mean you will have a lower monthly payment, but you will also accrue more in interest with a longer loan term.

Bottom Line

When determining the average used car loan rate and the amount of interest you may have to pay on a loan, you will want to check all three of your credit reports, examine your credit score and credit history and determine what steps you can take to improve your credit, so you can qualify for a lower interest rate.

Again, if you bank with a credit union, always start there first because the lender will already be able to see if you are high risk or not. Car buyers should always take their time, do their research, and tackle the work of fixing their credit prior to obtaining a loan for a car. It is always best to shop smarter and save money in the long run.

The post What Is the Average Used Car Loan Rate? appeared first on Credit.com.

Source: credit.com

The Ultimate Guide to Different Apartment Types

Apartment? Loft? Flat? Condo? Duplex? What do all those terms mean anyway? And you said rent is HOW MUCH? Bring on the face palm emoji.  When you just want a place to live that won’t cost you an arm and a leg, the different housing terms and buzzwords can start to run together in your […]

The post The Ultimate Guide to Different Apartment Types appeared first on Apartment Life.

Source: blog.apartmentsearch.com

My New Car Is a Piece of Junk. Can I Return It to the Dealer?

My Car Is a Piece of Junk. Can I Return It to the Dealer?

Once upon a time, you loved your car. You loved it so much that you agreed to the payment terms and drove it home from the dealer or, dare we say, a private seller. But now, that love has grown cold and you wish you’d never laid eyes on it. And to make matters worse, you’re bound to its existence and monetary depreciation—thanks to that sweet-little-pain-in-the-butt payment book. Or at least, that’s what you’re afraid of.

If you’re wondering if you can return your unwanted car without any more financial obligation, read on. We’ll discuss whether it’s possible and what you can expect.

Can I Return My Car?

Readers have asked us if they can just “give the keys back” and get a car that is reliable and without unanticipated problems—specifically, a vehicle they can confidently drive with their family, friends, or pets in tow. The short answer is yes, but there’s a variety of potential repercussions and unseen problems.

Before you do anything, find out the following:

  1. If you purchased your car through a private seller, does your state have a “lemon law”?
  2. If you purchased your car through a dealership, does the dealer have a return policy?

If you can answer “yes” to either of these questions, look into these options further to see if your circumstances apply and what you’re entitled to.

However, if you have no recourse under your state’s lemon law and your situation doesn’t qualify for a dealership’s return policy, returning the car is going to be a little tricky and could have credit implications—which you’ll want to consider, especially if you plan to lease or purchase another car once you give the other one back.

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Returning the Car to the Dealer

Despite how liberating and freeing a car return may feel, giving the vehicle back to the dealer won’t erase your debt. In fact, the consequences could be just as frustrating as the junk car itself.

“Technically, if you give the car back, it is the same as a repossession,” Matt Briggs, co-founder and CEO of RentTrack, explains. “Keep in mind you have a legal obligation to pay the terms of the loan and the car dealer is typically not the finance company who holds the loan (unless they are ‘buy here pay here’). Either way you cannot simply ‘give back’ the vehicle to a dealer and walk away.”

So look at it this way: to simply give the car back is to consent to automobile repossession—meaning the car would be sold at auction, and you would be responsible for the difference in what the car brought at auction and the amount you still owe on the car.

Plus, you’d be on the hook for expenses involved in this process, such as repossession, towing, title and sale, and storage. So if you leave the car at the dealership, you still owe the debt—which could total to more than the dang clunker is worth—and you’re out a working vehicle.

Concerned about what could happen to your credit score? According to Experian, a car repossession stays on your credit report for seven years—even after the original account goes delinquent. You can see how your debt has affected you by getting a free credit report summary on Credit.com, which will explain what factors influence your credit score.

Car Debt and Bankruptcy

There is a way, however, to force a dealer to “eat steel,” says Eugene Melchionnne, a Connecticut bankruptcy attorney. To do so, you can surrender the car and discharge the debt in bankruptcy—but then you’d have to apply for bankruptcy. “There is also a process for ‘cramming down’ the debt to the value of the car in bankruptcy, and in a Chapter 13 case, you can spread the balance owed over an extended period of time,” he says.

“For example, if the car loan is for $20,000, but the car is worth $10,000, the loan can be reduced to $10,000, and if there are, say, four years left to pay at $500 per month, the payments can be spread out to a maximum of five years on the lowered balance, resulting in $330 or more a month savings,” Melchionne explains.

Selling or Trading the Car Instead

With all that said, it might be simpler and cheaper to sell the vehicle yourself or trade it in for something else, which is what Matt Briggs suggests you do.

“[At] most repossession auctions, the cars sell for a much lower price than the retail value, so you may end up owing more than you would if you sold it [as a] private party (using a website like AutoTrader, eBay, or Cars.com) or if you traded it in on a different vehicle.”

The Bottom Line

For most of us, simply driving the car back to the dealership and handing over the keys, however tempting, is not a workable strategy. So after you dig yourself out of this mess, do as much due diligence as possible before you buy next time.

“Bottom line,” Briggs said, “you have a legal obligation to pay the car loan in full, so make sure you are getting a good deal before you sign on the dotted line.”

 

Image: hemera

The post My New Car Is a Piece of Junk. Can I Return It to the Dealer? appeared first on Credit.com.

Source: credit.com

How to Save Money for an Apartment

Whether you’re hoping to move out of your dorm, upgrade your current space, or finally live roommate-free for the first time—the financial logistics of renting an apartment can be overwhelming. The good news is, you probably can afford an apartment as long as you know how to save. When you budget efficiently, the cost of […]

The post How to Save Money for an Apartment appeared first on Apartment Life.

Source: blog.apartmentsearch.com

What Credit Score Do I Need to Buy a Car?

What Credit Score Do You Need to Get An Auto Loan?

Article Updated July 18, 2018.

If it’s time to purchase a new vehicle, you may be wondering about one obstacle that could get in your way: your credit. Maybe you’re unsure how good your credit is, and you don’t know what credit score is needed to buy a car either. It is better to educate yourself with the knowledge you need to move forward with the car buying process to help alleviate any frustration or challenges you may find along the way to car ownership.

No matter your credit score, you can probably find a way to finance a car loan if you absolutely must buy a new vehicle. The real question is what your credit score will cost you when you make the purchase. The better your credit score, the better your chances may be of receiving a cheaper and more affordable interest rate and payment per month.

So, while there’s no minimum credit score required for car loans, your credit history and credit score can definitely make a big difference in the car buying process.

Bad Credit Scores Mean Much Higher Interest Rates

According to data from Experian Automotive, the difference in interest rates on a new car loan for someone with excellent credit versus someone with very poor credit is over 11 percentage points.

In fact, 2.84% was the average interest rate someone with a super-prime (excellent) credit score paid in the first quarter of 2017, while those with deep subprime (very poor) credit paid an average interest rate of 13.98% or higher.

To illustrate this difference, consider that you apply for a 60-month loan on a car that costs $25,000. With a 2.84% interest rate, the total cost of your car would be $26,847 with payments of $447 per month. Not too shabby.

For the same loan but an interest rate of 13.98%, your car loan would cost you $34,887, and you’d pay $581 per month. That’s more than $8,000 extra! Clearly, poor credit can result in you paying a lot more for your new vehicle.

The difference was even starker in comparison to those financing used cars. Those with super-prime credit paid an average rate of 3.56%, while those with deep subprime credit paid an average of 19.62%—more than 16 percentage points higher.

Average New Car Loan Rate by Credit Score (Q1 2017)

  • Super-prime (781–850): 2.84%
  • Prime (661–780): 3.77%
  • Nonprime (601–660): 6.60%
  • Subprime (501–600): 11.05%
  • Deep subprime (300–500): 13.98%

Note that the credit labels above represent Experian’s credit ranges. Other credit reporting agencies use different scales and labels so the information may differ between each credit bureau.

Experian uses a scoring model of 300 to 850. You will find the prime borrowers on the top of this spectrum, and the deep subprime borrowers are at the lower end of the spectrum.

Even if your credit score doesn’t fall into the average ranks as outlined below, you may still be able to qualify for a vehicle loan with a score of between 600 and 660.

Average Used Car Loan Rate by Credit Score (Q1 2017)

  • Super-prime: 3.56%
  • Prime: 5.29%
  • Nonprime: 9.88%
  • Subprime: 16.48%
  • Deep subprime: 19.62%

The dealer may also evaluate your credit using another type of credit score called VantageScore. VantageScore, which was developed by all three of the major reporting agencies, assigns different weights to different parts of your credit history, such as on-time payments, balances, and utilization.

Some people may benefit from a lender using their VantageScore, while others may be at a disadvantage.

Subprime Auto Loans

If you find that you are ineligible for a traditional car loan because you have a low credit score or less than perfect credit, or your income is below where it needs to be, then you will need to look into a subprime auto loan.

Subprime auto loans tend to be a lot riskier than regular or traditional car loans, and they typically come attached to much higher interest rates and fees, and you are paying for much longer terms.

Subprime lending is also often referred to as near-prime, subpar, non-prime, and second-chance lending. However, instead of using this type of high interest loan, if available, you should instead improve your credit, so it is no longer less-than-perfect-credit. You could also see if you could instead qualify for in-house financing at the dealership, so you do not have to be a subprime borrower and risk putting yourself under even more financial strain.

Where to Start If You’re Unsure

If you’re nervous about letting a car dealer check your credit—but even if you aren’t—it’s helpful to check your score yourself in advance. You can check your credit report for free to make sure you don’t have any surprises and to find mistakes.

Note that the credit scores an auto lender uses may be slightly different because it will be tailored for an auto loan. Still, it’s a good start—if your general credit score is strong, you can also bet that the score the dealer uses is strong.

We also recommend that you try to get pre-approved for a car loan from a bank or credit union before setting foot in the dealership. With a set interest rate in hand, if the dealer can offer you a better rate, perfect! If not, you’ll be prepared to pay what your bank approved you for.

How to Get Pre-approved for a Car Loan

You can apply for pre-approval for a car loan easily online, in person, or even over the phone. The lender will perform a hard credit check to see the state of your credit, and they will then gather all of your financial information such as your monthly income, and they will then have a better idea about whether or not they will provide you with the car loan.

All of these factors will figure into the interest rate, monthly payment, loan amount, and even the length of the loan. There is also something called pre-qualification, but this process will not be as accurate as the pre-approval process because they are not able to take such a close look at your credit.

If and when you are pre-approved, the lender will provide you with an offer statement in the form of a letter, certificate, or another form of proof so you can take it to the car dealership of your choice and begin the car buying process.

Remember, even if you are pre-approved, you will want to set a very realistic budget for yourself prior to looking at cars so you will have a better idea of what you can afford and what you should be looking into.

Getting the Best Auto Loan

Getting the best auto loan is important when it comes to affordability and value. It is recommended that you look at options from different banks and credit unions and other online lenders to make sure you are getting the lowest possible interest rate you can get. Finding a car dealership that offers financing may also prove to be a beneficial idea as well; especially if your credit is less than ideal.

When planning to finance a new or used car, it is always best to take your time and plan it out because it is a big purchase and investment. If you are able and have the time, you should consider working on your credit score to improve your credit, so you are able to lock in a much better deal.

Pull your credit report and look through it thoroughly. Always be on the lookout for any errors so you can dispute them and get them removed. It is also important to make sure you are paying all of your bills on time, your credit balances are low, and you are not opening any new lines of credit except when you actually need to.

You will be presented with better financing options if you can show the potential lenders that you are responsible and can pay your bills on time and maintain good credit.

A Word of Caution

Credit inquiries related to auto loans made within a short time frame (usually 14 days, or 45 days depending on the credit score model being used) are supposed to count as a single inquiry. However, some of our readers have found their credit scores dropping after multiple car dealers sent credit inquiries for financing. This is another reason why getting pre-approved before going to the dealership is a good idea.

 

If want to make sure your credit is good enough to purchase a car, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get a free credit score updated every 14 days.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

Here’s What Else You Should Know about Auto Loans:

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Source: credit.com

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